LOS ANGELES RTI International Metals Inc.s effort to account for its growing involvement in complexand costlydownstream energy projects has forced the company to postpone filing its final second-quarter financial results.
RTI reported its preliminary second-quarter results late last month (amm.com, July 31) and said then it would report its final results in its Form 10-Q quarterly filing with the U.S. Securities and Exchange Commission. However, this past week it said it had notified the SEC that it "will be delayed in filing" this document with the agency.
The Pittsburgh-based titanium producer, distributor and fabricator said that an accounting review had concluded it needed a "different revenue recognition model" for certain energy projects.
The method previously used by RTI recognized revenue and cost of sales on the projects "upon completion of individual components of the projects," RTI said. But an accounting review determined that, "due to the evolving nature" of its energy business, a portion of RTIs energy market projects should use the "percentage-of-completion" method.
RTI vice chairwoman, president and chief executive officer Dawne S. Hickton said during a recent quarterly conference call that the company has been extending its energy offerings beyond its "historic" market of steel and titanium deepwater riser system components to "highly engineered and complex systems and subsystems."
Hickton noted that these projects have a "much higher revenue stream than previously available, but they also have a much higher development cost structure, significant learning curves as well as RTI direct contributions to development."
One of the earlier examples of the more-complex projects was oil spill recovery work performed for BP Plc in the Gulf of Mexico in 2010, Hickton said. Moreover, RTI said it is in the final stages of a "very complex system used in deepwater drilling" due to be completed before the end of the year, making the accounting review all the more relevant.
Hickton said in a statement this past week that RTI was confident that any accounting change would have no impact on either total contract revenues or income on the affected projects. About 20 past and current contracts are under review.
The energy market represents less than 10 percent of consolidated net sales, RTI said. However, the market has received increased attention from investors and security analysts when RTIs dominant commercial and military aerospace markets turn downward.
Commercial aerospace accounted for 55 percent of RTIs business last year, while defense represented 23 percent and medical, energy and other markets 22 percent, according to the companys Form 10-K filing with the SEC.